When Citibank, which has suffered huge losses and write downs of late, starts offering much higher than average market rates (currently around 2%), then it raises a number of red flags for me. As an example, think of some recent banks that offered much above market rates for their savings accounts shortly before their demise; Washington Mutual (WaMu) & Indy Mac for example. Both went bust and were taken over because they could not meet minimum capital requirements. Is Citi (C) going to follow the same route?
Submitted: Oct 23, 2008
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View Article: http://www.savingtoinvest.com/2008/10/is-citibank-going-bust-by-off...
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Comments Received:
I think that you are reading to much into this. Citibank has problems, but they aren't going to solve those problems through offering 3.50% to bring money in. They may not be too big to fail, but they are too big to solve their problems this way. This is an effort by the commercial banking division at Citi to compete with Chase and their peers. No matter what they environment, these guys need to compete. Also, I have now been through the failures at IndyMac and WaMu as a CD holder holding less that FDIC limits, and I would still jump on any good rate with good customer service, so long as I below those limits.
Posted: Oct 23, 2008
xsar
(Unregistered)
This is a very valid point. They are rushing to get deposits and they are in real trouble. I don't think that they can survive this without the help of the Arab friends that have already gotten so heavily in at higher levels.
Posted: Oct 24, 2008
RateHog
(Unregistered)
You are right in one sense that high rates can be an indicator of financial distress and the need for deposit assets. But I've noticed that usually banks in this shape put their rates at the top. Take a look at the rate tables on this site. The 3.5% offer is competitive, but not a Top 10 rate. There's also a precedent for this. Before the credit meltdown, Citi occasionally offered high yield accounts. Still, I also think people should keep their balances below the FDIC limits.
I'm also not as confident about ING's balance sheet. Their parent company this week required a $13.4 billion capital injection from the Dutch government amid rumors it was running out of capital.
Posted: Oct 24, 2008
Drew
(Unregistered)
What is so special about 3.5%, when several other banks offer higher interest rates??
Why would people "flock" to lower rates??
Posted: Oct 25, 2008
